One more Update

Well folks...Whoever shorted on my call and charts have made a fortune now as have I...Today might be a good day to take profits...atleast some profits...but be ready to short at higher levels again because we are still far from the bottom...Today lets see if 3950 holds..If not, we go down to 3800 area which should hold...Below this next strong support area is 3600-3550 area. But we will not go down in a straight line...

Now pls note above is for nimble players...If you dont want to trade in and out...Then just hold shorts with trailing stops...Based on your risk appetites...This is what I will be doing...Holding shorts until I see more reasons for a bottom...

Best.

PS: There was a query in earlier comments on how to learn EWT - Well its a tough question as there is no easy way. EWT is a very tough form of analysis because it all depends on a persons perspective...Again we need to use indicators to confirm wave analysis. EWT is best learnt thru sites like this and the rest is ONLY thru experience. Try other forms on analysis first and observe how waves unfold before using them solely...And ofcourse follow this site and Vivek Patils EWT analysis on ICICIDirect.

Some books on EWT can be found here - http://www.esnips.com/_t_/elliot+wave?q=elliot+wave

I honestly dont have an opinion on which one is good since I have never fully read an EWT book that is easy to understand.

Quick Update

Well I was not able to follow up on my latest post...Since of Hurricane IKE in Texas..Donno if anyone saw the news on this but things were quite bad over here...No Net..No Water...No Power..No nothing at home..hehe....out at a friends house to check things... Well I am still of same view...Msg posted few days back when nifty was around 4350....still of same view..I think first bottom will come at around 2 months or so from now....Not sure on time yet but with respect to levels, expecting 3600 first, 3200 second and finally 2960...not more than that at present because of some VERY VERY important support lines...But we can reevaluate when we get there....I am not going to post an updated chart here coz of the reasons I updated above...Its tough times...And I dont have much time...So thats it... All the best to all... Best.

Fractal Theory - Building the case for the next leg down

In my last post over here, I mentioned that I am exiting all long positions and sitting on the sidelines with small shorts until I see more evidence for some more rally OR 4522 being taken out on the upside. From then the market has clearly deteriorated. I hope some people reading over here would have been saved from all long positions even if you did not take any shorts. 

Yesterday I was looking at my EOD chart for hours and some things jumped out at me...I mean it was visible before too but after yesterdays study, I am really confident on what I see...Its clear that we have started the next leg down. I will present my ideas in the chart and writeup below this but before that, let me present something known as 'Fractals' and what it means. 

"A fractal is generally "a rough or fragmented geometric shape that can be split into parts, each of which is (at least approximately) a reduced-size copy of the whole,"[1] a property called self-similarity. The term was coined by Benoît Mandelbrot in 1975 and was derived from the Latin fractus meaning "broken" or "fractured."

More on fractals can be read here - http://en.wikipedia.org/wiki/Fractal

Elliot wave theory is built on the fractal wave theory - essentially what it means is that similar structure keep occuring in the market, in nature and well everywhere...Its a great mystery of nature as to why this happens. I believe other theories such as Kondrateiff also have their base in fractals. Fractals are recursive. Means the same structure repeats over and over again...They can be different on a whole but there will be so many similarities and when we can spot these, it builds up a high probability trade AND you also know when it gets invalidated. Fractals are why you have similar bull and bear wave structures in the market. Google more on fractals and you will be amazed at what you find...Fibo ratios also play a very important role in fractals and in effect EWT. 

Okay now coming to the chart. See below chart...I have added a good deal of comments on it. 

Now same fractal iterations as in above chart, can also be explained in EWT terms but you already know my count ABC-X-ABC where the final C might have just started. We have a very high probability of a big sell off coming. I knew it was coming. Only question was of WHEN? 

The other interesting thing is, back in May when the last fall happened also, a lot of market participants were bullish and confused expecting one last wave up. I was also one of them. It never happened. Almost similar today. Several folks including me expected one last burst up to 4650 and 4750...Might never happen. Areas to watch now are clear - 4200 and 4160 on downside and 4450 area on upside. 

Today inflation is 'GOOD' lol...If IIP is also 'good', pray for a rally to get out of any remaining longs and start piling on shorts....If we get a rally to 4400 area again, its a God given gift to get short.

Comments welcome please. Sometimes I feel like I am the only visitor to this site. Please post and offer your views also.

Best.

Confusion!

Confused on market direction in near term so I booked all longs today..Yesterday would have been ideal but greed and stupid ICICIDirect got the better of me...Well booked all today and started some small shorts right now with hedges also in place...A move above 4522 will get me out of shorts...Till then leaning slightly bearish...Yest moves made me bearish since we could not sustain above 4522-4540..I can explain the importance of this area later....But still overall damn confused on market...And when confused, better sit out or trade very small with tight stops...

Best.

US Markets EWT Counts

Chart is self explanatory. Expect our market also to follow something similar.

Best.

Market Psychology

A nice writeup from a fellow blogger...Read it even though its long...A good insightful post

PS: dont miss weekly analysis post below this!

As a trader I have always been fascinated by market psychology. By its definition the process of ‘price discovery’ is intrinsically a large experiment in human emotion which is driven by greed and fear. Although the former is what brings people to the market in the first place, in 9 of 10 cases it is the latter that proves to be the basis of their financial demise. As Peter Lynch put it: “The real key to making money in stocks is not to get scared out of them.”

Of course things change profoundly when you find yourself in an ensuing bear market - but in a way things remain exactly the same. Only that the dynamics now switch into reverse, in that the ‘upside’ is the continuous slide down and that the ‘downside’ are the various episodes of corrective bull rallies. Nevertheless, many investors seem to have a psychological barrier towards ’shorting’ stock and it is probably fair to say that an overwhelming majority have never shortened a single stock in their life. After all, it is a bit ‘unnatural’ for Joe/Jane Sixpack to grasp the concept of selling something now just to buy it back later, hopefully at a lower price. I have tried to explain this idea to some of my friends and most of the time they just give me a polite smile and hastily proceed to change the topic of conversation. As I enjoy getting invited back (especially since the food is free and the women are hot) I don’t press the issue. And finally, as I am an evil speculator I am aware of the fact that for every penny I wrest out of the market someone else out there has to lose it. It’s a zero sum game, no matter what anyone tells you.

The other aspect of investors losing money in a bear (and also bull) market is that they fall prey to their own cognitive biases. Let me suggest a few of my favorites - you can find the full list in Curtis Faith’s ‘Way Of The Turtle’ - a most excellent read:

• Loss Aversion - The tendency for people to have a strong preference for avoiding losses over acquiring gains.
• Sunk Cost Effect - The tendency to treat money that has already been committed or spent as more valuable than money that may be spent in the future.
• Recency Bias - The tendency to weigh recent data or experience more than earlier data or experience.
• Bandwagon Effect - The tendency to believe things because many other people believe them.
• Low of Small Numbers - The tendency to draw unjustified conclusions from too little information.

I guess you get the picture - people often (if not most of the time) make decisions which are driven by human emotion, not by rational analysis. The natural instincts of our deeply ingrained reptilian brain might be well equipped to staving off natural enemies and surviving a cold winter, but are completely orthogonal to the skills needed in making money in the market. Yes, we all like to believe that we are stone cold traders who can press the buy button when our instincts scream at us to start selling everything now! But evidence points quite to the contrary - most traders fail because they sooner or later fall prey to their own fears. Of course there is a good portion of people who have a trading system without a statistically reliable edge or have no trading system at all, but this is not today’s topic.

Reducing the ‘Noise’

The Internet and modern information technology as a whole has given small time investors/traders access to a wealth of data and tools that was reserved to a wealthy elite just a decade ago. I should know - I was there and remember paying top Dollar for a trading platform that does not even come close to what I am now able to enjoy for free today. On top of that I am able to access a vast amount of information and news at the push of a button, right from the convenience of my home. I can also watch financial networks covering the market pretty much 24×7 (not that I personally ever do, but it’s there). For the fundamental trader I can only guess that this is pure heaven, however for the technical trend trader (yours truly) all that data in some ways may be more of a curse than a blessing. You see, the human brain is not very good at absorbing vast amounts of information. We are good at averaging - some call that ‘fuzzy logic’, and most of us are very visual. Which is why man traders eventually embrace technical analysis. As the thinking goes - all that vast amount of fundamental data which we could not possibly hope to digest is simply reflected by one main denominator, the actual market price of the underlying equity or commodity as depicted by a price chart (remember, I was talking about ‘price discovery’ at the beginning). Add to that some time tested chart patterns like ‘triangles’, ‘head and shoulder formation’, ‘double tops/bottoms’, etc. and you’d think that trading should actually be fairly easy, right?

Well, as you probably have learned from the tribulations of life as a trader - the answer is no. We just can help ourselves it seems and sometimes - and I actually dare to say most of the times - the majority of us are unable to see the forest for the trees.

Weekly Trends

Late on my posting for the week since I had some problems over the week...An accident...Luckily nothing happened to me but my car...well thats a different story...But well thats life and it happens...

Anyways, coming to the market, I should have updated on Thursday but due to problems above could not...I turned slowly bullish on the day as the market was holding onto support levels quite strongly and as I said before US markets were quite ugly at the time...We opened ugly too but still bears were not able to break support even with all the global support..Slowly I turned bullish and started buying with tight stops...Happy I did so..!

Lets look at the news front..We have 2 major market moving news that came out over the weekend...One is global and the other is local...Not so sure which one is more important but together it should give a big big boost to our markets in the short term...We still need to see and review what this will do in the longer term...

The Global News - Well if you didnt hear it by now, Friday after market hours, the US govt. made public the plan to nationalize/support the 'deep in trouble' Fannie and Freddie...This is a very bullish thing to the markets esp financials due to the amount of paper being held by all the different banks...Longer term..Well makes no difference..Infact its very bad as in essence capitalism is losing and something different is happening in the US of A. I would say we live in unprecendented times...The other most obvious bad thing is that USA goes more into debt worsening an already bad situation.

The Local News - Sure everyone knows this..The NUKE deal finally falling thru and it looks like we have a better deal now...Quite bullish.

SO. A gap up is almost guarranteed..If not long, look to buy pullbacks...Dont rush in and buy..Lets see how the markets react at supports and resistances...Since I am already long from Friday, I will sit tight...

Now to the charts...

First the daily...Comments on the chart and nothing more to say here.

Heres the log of the daily. Very interesting...Again nothing more to add here except for the comments on the chart..Open in new window to view.

The weekly....Note here how the MACD is now a clear buy...But note that this is quite lagging to be careful following this except for longer term cash investments. Stochastics is quite neutral right now...Need to see this week to understand more on what will happen next.

Overall the charts and news are quite bullish for this week. But longer term, we remain bearish...Short term and maybe medium term(1-2 months?)...We can turn bullish...Watch out for more bullishness coming from the new channels and public...This will be our signal to be more careful...For now, things start to look rosy again...But dont be fooled into longer term investments...This is still an upward correction to all the downmoves we had so far.

Best.

What Next?

No charts today...I am not sure yet of market direction...BUT I will look to exit longs today at some good profits...Only because I dont want to let these profits go..We will see what the market does near 4540 and 4620 if we do get there...

I was quite bullish after our market action on the last trading day but after watching the US market for past 2 days, I dont like it at all...Does not look good at all...Sure our market can still rally but to me it makes sense to take profits here and now if you're long with me...

I might also try some small shorts today but remember that its quite risky because of the strong momentum we saw before...We should know within the next 2 days whether it was the real thing....Till then the best thing might be to just sit out...Or if you are gutsy try some day trades...

Best.

Howz that!...Back with a Bang

What a rally...whew!....How was my call guys for short term bullishness? :)

Next tgt is 4620 area..(4540 still needs to be taken but I think it will)...If we sustain above this, 4750 comes after that....BUT one step at a time...Read my 'morph' post for more details on what to come next....More charts and analysis later...

I got almost best levels to cover shorts and go long...Hope my readers did the same with me...
If my past 2 posts helped you keep out of trouble and also made some money, pls comment here!...I appreciate appreciation...lol :) ...

Have a good trading holiday!

Best.

Bull and Bear Traps

Yesterdays trading was quite funny..First they trapped all the bulls on the wrong side and then got everyone beared up and then trapped all the bears...Good for me..I used the initial weakness to close all shorts and go long...As I had updated in the post below...

We need to take a slightly longer term view and stick by it to survive in this market...no other way...As of now I am bullish for short term..only very short term...The trend can turn back down any time but for now, we need to play attention to the bullish case...For now...

If you are long, play with tight stops and keep booking profits...Thats the only way in this market.

Now one thing to note here the earlier bearish signals on the daily...macd and stochastics are giving some signals that they might be neutralised...Watch this place for more later..For now the bearish case is losing strength and the bullish one is gaining...lets see how it turns out over next couple of days...This might be the last gasp of the dying market...

Best.

Morph Point

Well from my previous post, you would have seen my state of mind..lol..man i love that monkey...well it captures well the state of mind of traders..not only in our markets but globally...one day we go up, the other day we go down...confusing the hell out of everyone...well you would have got by now that I am confused..we are at a wave morph point...I will show one chart which was my earlier preferred scenario...and a 2nd chart after that which shows the other possibility which is also becoming strong day by day...the more bullish scenario...

First possibility...what i was looking at for all these past days...


2nd one...this one is gaining credence every day we go by..and we need to pay attention to this one here...being completely bearish is dangerous..

Hope you read my comments on the chart...I think we are in a strong 'morph' scenario..we need to give importance to both cases here..As you know I am short still from 4400..I am thinking I will cover today on initial weakness and maybe go long in small amounts..now dont get me wrong..I am still bearish..but see some upside in short term...

Comment welcome please...Good or Bad...

Best.

State of Mind of the Nifty Trader!

Confusion confusion....what to do next....lol :-)

Btw, a note on this blog, we surpassed 10000 visitors a couple of days back...in just a few months I think...I admit there were slow periods in between due to my work and other commitments but hopefully we can maintain the momentum going forward. Thank you for supporting this blog with your visits and comments....!

Weekend Analysis to follow soon....See above picture for my current state of mind..lol :-)

Best.

Expiry Day

Well market declined much more than what I expected it to in one day. However we are close to short term strong support(4200, 4150) so I do not rule out a fierce short term rally fuelled by short covering. Intermediate term and longer term, I do not see anything exciting to be bullish about but short term bears can feel some pain. Break 4160/4140 area and the bears will rule big time...Retest of the lows and even lower will come if this happens.

Trade Safe.

Best.

Make or Break!

More likely is break. Be extremely cautious here folks. I smell some serious danger ahead. Only thing I dont know yet is when the carnage will start. Over the past few days I have seen some very bullish messages around. Dont be fooled by all this noise. Let the market speak. What we have seen so far is weak hearted attempts to take out overhead resistances. But market says no. Today US markets look bullish so far..But I will remain net short from 4400 as I said I will do in previous update until I have a daily close above 4450 area. Then will reevaluate and post what I do next.

No charts today. Nothing has changed. Everything looks the same on the charts. The range compression we have seen so far says the next move will be a doozy...! Up or down is the big question and I vote for down until further notice! ;)

Best.

Weekly Trends and Analysis

Analysis for the week ahead. I will present a bigger picture look at things after we look at the charts.

Starting with the daily. Some comments on the chart - open in new window to view. Here we can see the MACD is signalling danger. Last time it happened, we had a major downslide. Will we do the same this time? We need to watch this week very closely.



Next the weekly chart. Here the stochastics is trying to crossover to the downside. Last times it happened resulted in major mayhem in the markets. Break 4240 and its probably over for the market - Under this 4150 is also strong support but 4240 might be more important as its last weeks panic low.

Daily log chart shown here to present a different look at things. Note how we are back in the downtrending channel on this one.

Lastly hourly charts with comments on it. Nothing more to say here.

Overall charts and market are showing some confusing views. Prefer to sit out in cases like this. I am looking to build short positions at higher levels maybe starting today. So many strong resisitances at higher levels. This week being expiry week might see a lot of index management by the market makers. Might be a good idea to sit out...Daytrading can be done though. I have given some key nos in the charts above. Play in between these levels.

Okay now coming to the bigger picture.

Lets face it folks. We are in a major economic upheaval. We need to pay attention to the global picture also. Being in the US of A, I see things here and I am convinced beyond a doubt that we are probably in a very serious economic predicament - There are no jobs..Jobs are being cut as it is...People have stopped buying cars and houses...Overall tighening of spending. Flashback to 6 months back and it was very very different. People were upgrading their cars, their houses and so on...Its funny what a few months can do. The last few years saw people spending without any restriction money that they did not even have in the first place. Easy credit and uncontrolled spending is what lead to all of this. So pain is being faced right now and may continue for more time than what people are expecting.

Come home to India and as I said some time back, the PE growth in our markets have been quite pathetic over the past year. 8% or so. I mean that is really bad. We factor in inflation and the real growth becomes even more pathetic. We are in for some dire times folks. Be careful with your money.

BUT as they say, its always darkest before the dawn and the same is applicable here. Markets are a leading economic indicator. We will begin to recover before the broader economy. When?

I expect we shall see a major downturn over next few weeks...maybe a month and then go toward new lows....The next new low at maybe 3600-3400 levels will be a fantastic buying opportunity for the longer term. Again note that the levels and timeframes here are more of speculation that anything else. Take it with huge handfuls of salt :)

Its my longer term view on the markets and economy and so will be continuously updating them...I think we shall make a significant bottom within next 3-4 months...Then a big upmove into March of next year...More decline/consolidation after that...But let us see how the next few months play out first.

Best.

Is it over?

Not looking good folks...Yesterday was a clear harbinger of things to come..I was expecting a bigger and better bounce but did not happen to the extent of what I thought. But yesterday's market has damaged the charts and I do not see an easy way out of this....

Weekly stochastics has more or less crossed over to the downside. Weekly MACD did the dreaded kissback I was talking about and rolled over. Daily MACD also issues a sell..So what gives? We can see maybe a very small bounce today but ultimately I see a lot of weakness for us in medium term...Retest of the lows and maybe lower is on the cards.

Yesterdays market left me very frustrated. Market is doing pretty much what I expected it to do but I am just not timing my trades right...Or in other words trying to do too much and catch every swing... :( Probably I need to learn how to sit tighter in my trades!

But well better luck next time then.... ;)

BTW, how was my GOLD call? Good profits very fast...lol...Anyone made use of it?

Best.

Market Update - August 20th 2008

Later when I posted market thoughts, I mentioned we should have weakness and then strength later in the week. Played out pretty much as expected. Now the weakness might be over or very close to over. Yesterdays lows are important...Or slightly lower at approx 4270 levels. Below this the most important number as stated before is 4150.

I am trying to build some longs right now - this will be a very short term position..Or a scalp only...I will bail on weakness or if I get something close to 4520. But lets see how it plays out.

See hourly below. We look like we are very close to some important support levels. I think its critical we hold this area where we are at now.



Next the daily - I have added some notes on this. Nothing much more to say.

Then the weekly. Again same thing..Notes on the chart. We are quite close to a big intermediate term decline but before that I am expecting a decent bounce. How much we bounce I do not know yet..But it could very well be a lower high...Watch carefully - Things could get quite ugly soon. I think longs are risky unless you are very nimble....I am also looking to build up some shorts at higher levels.

I will post a 'Big picture' article after some time.

Trade safe ;)

Best.

GOLD!!

Well folks...The GOLD bug has finally bitten me...lol :)

See chart below...I figure its in a nice ABC correction after which a good uptrend should start again....

Other reasons why GOLD should go up is flight to safety and inflation. Overall its a good a safe place to park some money. I believe we have some very tough times ahead and GOLD is a good place to park some money. I am buying GOLDBEES..No leverage...Bit by bit until I build a sizable position. Again note that this is a long term position without leverage so I will not be worried about short term price blips...

And we are very close to long term supports. The 770-740$ area is extremely strong support.

Buy the dips...

Watch out for my 2 next posts probably today itself where I will go over market thoughts and also take a look at the bigger picture....Tech and Funda...Will touch over GOLD again then.

Best.

Market Update - Monday Aug 18th

Quick update today..Not posting any charts..Earlier posted charts still hold valid.

Now at this point, I am very uncertain about market direction..My gut says we are going to dip very hard in the first half of the week and then MAYBE we recover after that.

Either way, nos to watch is 4480 on upside, 4420 and 4350 on downside. Deep support is 4150..Below this, bears will rule big time..

I might just stay out and watch this week until I get some more clarity. I favour downside for now as I said last week 4470 was important - We broke that convincingly. So bears have the upper hand short term...Intermediate term, bulls have to hold 4350 If not, its a clear ride to 4150...And if thats broken, God save the bulls.

On a different note - One analyst whom I respect a lot and whom I also consider as a mentor of sorts - Rajan Sir has started a new blog - http://niftyspotter.blogspot.com/

Check it out...I will be adding this link also to my blog lists on the right shortly...

Best.

Range Bound again for Now

Not much to update today. Hope everyone enjoyed reading the earlier extensive analysis. I mean this to be more of followup than anything else.

Anyways one thing to note is that over past 3 days, market has turned significantly weaker. The high so far is 4650 around and recent low is 4470. Until 4470 is broken, bulls are safe but I expect will be broken sooner than later. Only question is how far high up do we go?

No easy answer but lets look at the daily. Put up in log scale on the advise of Kpl sir and several others...Looks interesting..As of now market looks like its broken out of the channel and is teetering on the edge...Which is why I said earlier low 4470 area is important - Break this and trade below for some time and the top is in - 4650. If we can go above 4620-4650, we again open up targets of 4720-4750. This itself might be very difficult to attain so I have no expectations of above this. I would give odds of 4650 being the top quite high. Lets see if 4470 breaks.


Heres the hourly. Pretty much substantiates what I wrote above...Watch 4470-4450 on downside and 4620-4650 on upside. In between we will just be rangebound and volatile.

It would be interesting to see how the SEBI meeting outcomes(nothing much) affects the market today.

You all have a good long weekend and Happy Independence Day in Advance! ;)

Best.